This preview shows page 1. Sign up to view the full content.
Unformatted text preview: g ) increases, the numerator increases and the denominator decreases. Therefore, the stock price will rise. (3) Long-term interest rates will fall according to the expectations hypothesis. In the generalized dividend valuation model with di/erent interest rates: P t = D t +1 1 + i t + r + D t +2 (1 + i 2 t + r ) 2 + D t +3 (1 + i 3 t + r ) 3 + : : : (2) the denominator of each term with a long-term interest rate fall. There-fore, the stock price will rise. 1...
View Full Document
This note was uploaded on 07/17/2008 for the course ECON 520 taught by Professor Ogaki during the Spring '07 term at Ohio State.
- Spring '07